After three consecutive years of financial losses, Lenoir Memorial Hospital is looking at larger-than-ever deficits this year.

The hospital board approved its 2014 budget for its fiscal year beginning Oct. 1 with at least a $3.4 million loss after projected investment earnings of about $3.5 million were added.

This year’s budget projects $105.6 million of revenue and $109 million of expenditures. It’s the first time the hospital has not been able to cover its expenses.

LMH announced this week it would be implementing a strategic cost reduction and a facility redesign plan. The budget deficit is expected to result in staff reductions, as well as phasing out and combining services.

“Contemplating a workforce reduction is the hardest thing hospital leaders have to do,” said Sarah Mayo, vice president of financial services, “but ensuring hospital care for this community is our first priority.”

An option to retire will be offered to employees ages 55 and older with 20 or more years of service, and employees may be able to move into positions left vacant.

The reasons given by LMH are state cuts in Medicaid, the state’s decision not to expand Medicaid, federal Medicare cuts and federal cuts due to sequestration, she said.

The losses are projected to be as much as $5 million.

Mayo said losses in previous years haven’t been so large the investment income couldn’t cover them. But this year is different.

“This year, the cuts are larger,” she said. “… It’s that sort of perfect storm effect.”

The hospital has taken hits from state and federal cuts, including about a $1 million loss of Medicaid revenue. There is also a loss of about $1 million through the Affordable Care Act.

“There is a provision (in the Affordable Care Act) that starts this year,” Mayo said, “that reduces the Medicare funds that the hospital receives for taking care of indigent patients.”

More than 70 percent of LMH’s patients are covered under Medicaid or Medicare, while 8 percent have no insurance. Less than 20 percent of patients have managed care reimbursements or other commercial insurance.

More than 13 percent of patients cannot pay for services amounting to a loss of more than $34 million of revenue.

Hospitals across the state are experiencing similar financial situations. Wake Med suffered more than $8 million in losses, is closing two nursing facilities and is reducing staff. Vidant Pungo is expected to close.

“The healthcare industry is a tough one to be in at this time,” LMH President and CEO Gary Black said. “It is our hope that very few employees will be affected by these changes, that through attrition, early retirement and redeployment we can limit the involuntary displacement of our staff.”

Hospital employees were notified of the changes Tuesday.

Page 2 of 2 -

Margaret Fisher can be reached at 252-559-1082 or Margaret.Fisher@Kinston.com. Follow her on Twitter @MargaretFishr.